Section 6 - Distributing Products

Question 1

agency: how it works

Answer 1

an AGENT promotes the product or service of the principle, but not sell it.

the agent finds a client who is interested in buying, will obtain PURCHASE ORDERS on behalf of the seller in the foreign country and forward those orders to the seller (manufacturer/principle, and the transaction (sale) occurs directly between the PRINCIPAL and the FINAL CLIENT.

There is an agency fee for promotional activity on behalf of the principle (manufacturer).

Question 2

An AGENT is an entity/individual in a specific area that SOLICITS … (1)
for the goods but does/does not (2) take title to the goods.

The agent does/does not (3) bear the risk that the local buyer will not pay.

Rather, this risk remains with the …. (4)

Answer 2

1. orders
2. does not
3. does not
4. seller

Question 3

does the agent create warehouse or stocks?

Answer 3

The agent won’t create any warehouse or stocks, but maybe just some prototypes.

Question 4

when an agent becomes a sales representative?

Answer 4

The agent assumes the name of sales representative when, in addition to the promotion of contracts, he also has the power to CONCLUDE them on behalf of the proposer.

in some jurisdictions the agent might have the power to sign the contract in the name and behalf on the principle, to speed up the process, even if it can create some tax issues.

Question 5

is the agent considered an employee or a service provider?

Answer 5

neither; is in the middle between a third service provider and an employee

Question 6

does the agent have a stable relationship with the principle?

Answer 6

the agent has a stable relationship to the principal, but it differs from other subordinated auxiliaries/employees.

Question 7

distributor: how it works

Answer 7

An independent DISTRIBUTOR BUYS the goods from the seller for RESALE in the foreign country As the distributor takes title to the goods, the distributor ASSUMES THE RISK of being unable to resell the goods.

PRINCIPAL VS PRINCIPAL RELATIONSHIP

Question 8

does the distributor take the risk of the goods if something happens in delivery?

Answer 8

they take the risk of the goods; if something happens during the delivery they must take responsibility

Question 9

does the distributor arrange storage/warehouse/stocks for the goods and delivery?

Answer 9

yes, the distributor must also arrange storage/warehouse for the goods and delivery and buyers buy DIRECTLY from the distributor

Question 10

Basic elements of distribution agreement: commitment to purchase

Answer 10

there is a commitment by the distributor to periodically purchase certain minimum quantities at conditions predetermined in the distribution contract

Question 11

Basic elements of distribution agreement: promotion of resale

Answer 11

undertaking by the distributor to promote, in his own name and on his own behalf, the resale of the products purchased in a given area, in accordance with the terms laid down by the manufacturer himself

Question 12

which kind of relationship with agent?

Answer 12

PRINCIPLE - AGENT

Question 13

which kind of relationship with distributor?

Answer 13

PRINCIPLE - PRINCIPLE

Question 14

What is franchising?

Answer 14

is a contract between legally and economically independent parties whereby the FRANCHISOR (owner of brand) GRANTS TO FRANCHISEE, for consideration, the availability of a set of industrial or intellectual property rights relating to trademarks, signs, utility models, designs, knowhow, patents.

Question 15

in which sectors is the franchising most common?

Answer 15

f&b, fashion

Question 16

what does a franchisee must do?

Answer 16

1. use the franchisor’s distinguishing MARKS
2. use the franchisor’s distinctive SIGNS
3. obliged to fully comply with the Franchisor’s BUSINESS MODEL, also technical and commercial practices and approaches

Question 17

what does the franchisee have to pay to the francisor?

Answer 17

a portion of those profits will go to the franchisor in exchange for running that branch. These are known as franchise ROYALTIES. In other words, the franchisee pays money to the franchisor for the use of their business.

Question 18

What is a contract of dealership?

Answer 18

it is a type of distribution (because he buys the products and resell in the market using the same brand)

legal contract that outlines the rights and responsibilities of a manufacturer and a dealer

Question 19

what does the dealer have to do?

Answer 19

• assure efficient organization
• regularly quality control
• purchase of minimum quantities & holding of stocks
• practice of prices & resale conditions
• provision of technical assistance to customers
• organization of the individual outlets/shop

Question 20

key elements when considering a distribution contract

Answer 20

1. control
2. competition (anti trust)
3. termination issues
4. IP issues
5. choice of jurisdiction

Question 21

key elements when considering a distribution contract: CONTROL

Answer 21

• with a distributor, you have less control than an agent
• you are liable for them
• employment risk for agents, since they are quite hybrid between employees and service providers

Question 22

key elements when considering a distribution contract: COMPETITION (related to the desire of exclusivity by agents and distributors)

Answer 22

commonly, agent & distributors would wish EXCLUSIVE RIGHT for a particular territory (due to the amount of time, effort and resources required).

Exclusivity may create ANTITRUST or COMPETITION law issues because it can reduce competition.

Question 23

key elements when considering a distribution contract: TERMINATION (related to high penalties for the seller-principal)

Answer 23

either with or without cause, there are big penalties for the principal if he wants to stop the relationship.

1. WITH CAUSE (WITH BREACH OF THE AGREEMENT: EX. fail to pay royalties): monetary settlement
2. WITHOUT CAUSE = monetary settlement + COMPENSATION for stock, advertising, promotional expenses

Question 24

key elements when considering a distribution contract: intellectual property (from the principal and the agent/distributor side)

Answer 24

PRINCIPAL=
- ENSURE that trademarks, patents, and copyrights (IP Rights) are registered under local law,
- the seller is the sole and exclusive owner of the intellectual property rights;
- the Agent/Distributor has the right to use the IP for the SCOPE of the agency/distribution agreement (under the authority of the seller)

DISTRIBUTOR SIDE=
- not copy, alter, develop or use IP rights
- not make any claims to the IP
- notify the seller of any violation and assist

Question 25

key elements when considering a distribution contract: law and jurisdiction

Answer 25

Is advisable that the seller has assessment of local foreign laws and that the agreement between the parties is drafted to make as clear as possible what type of relationship is being created.

Question 26

e-commerce: is the customer obliged to accept a method of reimbursement different from the payment method that it has used?

Answer 26

no, he can refuse

Question 27

e-commerce return policy

Answer 27

(except if product is ”custom-made”) usually 14 days it covers the price paid; return costs are sometimes charged on the consumer

Question 28

which is the main legal framework in EU for e-commerce?

Answer 28

e-commerce directive
geo blocking regulation
GDPR
Audiovisual media service directive
fairness & transprency online platform regulation
copyright directive

Question 29

what is the VAT?

Answer 29

value added tax: a consumption tax (similar to the sale tax in the U.S.) that applied to almost all goods imported to EU, except when there is no value added.

Question 30

whose the responsibility for injuries or damages caused to customers by defective or dangerous products?

Answer 30

manufacturers, distributors, suppliers and retailers

Question 31

if I have an issue in shop or online, which type of liability I can claim?

Answer 31

Liability only for harm DIRECTLY caused,

BUT with processional services (for example law and medicine), I can also claim liability for harm INDIRECTLY caused by these services?

Question 32

when and in which terms compensation is allowed for personal damage caused by products or damage to goods used for private purposes?

Answer 32

I can ask for a restoration of the damage (come back to the normal situation) + compensation of the damage